Third Point’s Dan Loeb has taken a big position in the shares of Campbell Soup Company (CPB). He has expressed his intention to take measures to make the company’s share price soar.
Here is why you should care…..the guy is an incredible investor.
Since his hedge fund Third Point Capital launched in 1995, the fund has generated average net annualized returns of 18%. That has smashed the 10% annualized return of the S&P 500 over that same period.
But even that undersells the true investing ability of Loeb. What you need to realize is that the 18 percent annualized number is the net return to his fat cat hedge fund investors…….AFTER FEES.
Remember, these elite hedge funds charge fees that are 2 percent of assets and 20 percent of profits.
Before his fees Loeb’s true investment performance is closer to 25 percent annualized over this time period than it is to 18 percent.
Yes the reality is that his actual investing performance has more than doubled the market!!!
If you are wondering if Loeb’s involvement here is a good thing for shareholders all you have to do is look at Campbell’s shares price performance over the past 20 years.
It stinks! No that doesn’t do it justice…..it is horrifyingly bad!
Check out the graphic below which compares Campbell to its peers.
Imagine….running a company with a globally powerful brand for 20 years and not generating any returns for shareholders! This is beyond incompetence.
Making this story even more nauseating is that as the company floundered the incumbent Board of Directors lavished its fellow board member Denise Morrison with more than $60 million in total compensation during her tenure as CEO.
Over Morrison’s seven years as CEO earnings did not grow, leverage ballooned, and ROIC imploded yet she got paid $60 million!!!
I’m pretty sure a ham sandwich could have had better results running the company.
What Loeb intends to do is replace the current woefully underperforming Board of Directors with a group of experienced, qualified and successful people.
The game plan for Loeb’s proposed new Board involves an operational turnaround looks like this:
- Attract a world-class leadership team (in contrast to the incumbent Board which appears unable to recruit leading external candidates)
- Will take bold actions (in contrast to the incumbent Board which seems obstinately committed to maintaining the status quo at the expense of progress)
- Independent Slate expects operational turnaround to improve earnings and revalue shares
- Independent Slate will also conduct a proper strategic review, where truly “everything is on the table”
What that game plan could ultimately lead to is this…..
Yes a sale of the company…..which at recent comparable transactions should fetch a share price in the range of $52 to $58. That would be a near 50 percent premium to the current languishing share price.
A merciful end for long suffering shareholders and a very rewarding experience for anyone joining Dan Loeb in Campbell Soup shares today.